FAILURE TO RENEW A BOND RESULTS IN THE LOSS OF THE RIGHT TO MAKE USE OF A

PERIOD, THUS MAKING AN OBLIGATION IMMEDIATELY DUE AND DEMANDABLE

THEREAFTER
Under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines, the debtor shall lose every
right to make use of the period when he does not furnish to the creditor the guaranties or securities
which he has promised, and when by his own acts he has impaired said guaranties or securities after
their establishment, and when through fortuitous event they disappear, unless he immediately gives new
ones equally satisfactory. (Fernando A. Gaite vs. Isabelo Fonacier, et al, G.R. No. L-11827, July 31,
1961)

x—————x

FAILURE TO RENEW A BOND RESULTS IN THE LOSS OF THE RIGHT TO MAKE USE OF A
PERIOD, THUS MAKING AN OBLIGATION IMMEDIATELY DUE AND DEMANDABLE
THEREAFTER

Fernando A. Gaite vs. Isabelo Fonacier, et al

G.R. No. L-11827, July 31, 1961
Reyes, J.B.L., J.:

FACTS:
In this appeal to the Court, defendant Isabelo Fonacier challenges the decision of the CFI ordering the
payment to plaintiff Fernando A. Gaite of an obligation the former alleges should not be made on account
of nonfulfillment of the suspensive condition.
Fonacier, owner of 11 iron lode mineral claims (Dawahan Group) in Camarines Norte, constituted a
"Deed of Assignment”, and appointed Gaite as his true and lawful attorney-in-fact to enter into a contract
for its exploration and development on a royalty basis. Gaite executed a general assignment to the Larap
Iron Mines owned solely by him. However, Fonacier decided to revoke the authority granted, which he
assented. Said revocation included the transfer to Fonacier of the rights and interests over the "24,000
tons of iron ore, more or less" already extracted for a certain consideration.
A balance needed to be paid. To secure payment, Fonacier delivered a surety agreement with Larap
Mines and some of its stockholders, and another one with Far Eastern Insurance. When the second
surety agreement expired with no sale being made on the ores, Gaite demanded the P65,000 balance.
Fonacier contended that the payment was subject to the condition that the ores will be sold.
Gaite alleged that the obligation was not conditional and as instead one with a term and that the
obligation became due and demandable under Article 1198 of the New Civil Code. The lower court ruled
in favor of Gaite. Hence, the defendants jointly filed an appeal.
ISSUE:
Is the obligation of Fonacier to pay Gaite one with a period or term and not one with a suspensive
condition?
HELD:
It is an obligation subject to a period or term.
We find the court below to be legally correct in holding that the shipment or local sale of the iron ore is
not a condition precedent (or suspensive) to the payment of the balance of P65,000.00, but was only a
suspensive period or term. What characterizes a conditional obligation is the fact that its efficacy or
obligatory force (as distinguished from its demandability) is subordinated to the happening of a future
and uncertain event; so that if the suspensive condition does not take place, the parties would stand as
if the conditional obligation had never existed.
The parties did not intend such state. The words of the contract expressed that obligation to pay and
intended Gaite to be paid. Furthermore, the sale of the ore to Fonacier was a sale on credit, not an
aleatory contract. For their failure to renew the bond, the appellant has forfeited the right to compel Gaite
to wait for the sale of the ore before receiving payment of the balance.
Under paragraphs 2 and 3 of Article 1198 of the Civil Code of the Philippines, the debtor shall lose every
right to make use of the period when he does not furnish to the creditor the guaranties or securities
which he has promised, and when by his own acts he has impaired said guaranties or securities after
their establishment, and when through fortuitous event they disappear, unless he immediately gives new
ones equally satisfactory.
Gaite's acceptance of the surety company's bond with full knowledge it would automatically expire within
a year was not a waiver of its renewal after the expiration date. The balance became due and payable
thereafter.